Key facts
- EU finance ministers agreed on a compromise to enhance the bloc's securities watchdog.
- The European Commission criticized the deal for lacking ambition and potentially hindering effective supervision.
- A rule allowing national supervisors to scrutinize draft decisions was modified to limit delays.
- Germany's stock exchange, Deutsche Börse, and Spain's stock exchange secured carve-outs from direct EU oversight.
- Belgium's securities depository, Euroclear, is expected to face direct EU oversight.
- The EU budget will cover 60% of the watchdog's costs not covered by industry fees.
EU finance ministers reached a compromise on Friday to enhance the bloc's securities watchdog, a move intended to bolster Europe's position as an investment hub. However, the deal has exposed significant divisions among member states and with the European Commission over the extent of national control and the inclusion of carve-outs for major stock exchanges.
The European Commission, through Finance Commissioner Maria Luís Albuquerque, expressed "deep regret" that the compromise "falls significantly short of the level of ambition needed" for the European Securities and Markets Authority (ESMA) to become an effective supervisor. The current text, according to Albuquerque, would not allow for this.
France led a late effort to strengthen the watchdog's executive powers, specifically objecting to a provision that would allow nine national supervisors to force the watchdog's executive board to submit draft decisions for further scrutiny. The Irish EU presidency reportedly tweaked this rule overnight to limit national supervisors' ability to delay decisions and preserve the watchdog's emergency action capabilities.
Despite this adjustment, which satisfied France and most other countries, the Commission and European Central Bank President Christine Lagarde remained critical. Beyond governance concerns, Albuquerque targeted supervisory carve-outs introduced to accommodate Germany's request to exclude its stock exchange, Deutsche Börse, from direct EU oversight. Spain's stock exchange, Bolsas y Mercados Españoles, also stands to benefit from these exemptions.
Smaller EU countries voiced concerns that these waivers grant preferential treatment to larger nations. Belgian Finance Minister Jan Jambon stated that the package "includes as many ins as there are outs" and that "Germany has won in certain cases." As a concession, Germany backed a review clause allowing the Commission to revisit the carve-outs two years after the rules become applicable, though any changes would require new legislation.
Dutch Finance Minister Eelco Heinen, who supported the deal, described the carve-out as temporary, suggesting that if the exchange grew, it would fall under EU supervision, thereby not disadvantaging Dutch companies or pan-European entities like Euronext.
The agreement now places pressure on Members of the European Parliament (MEPs) to finalize their position so that negotiations on the final text can commence. The Commission hopes that future legislative discussions will offer another opportunity to improve the text. The compromise also raises concerns about increasing pressure on the EU budget, with the budget expected to cover 60% of ESMA's costs not covered by industry fees, a point Albuquerque highlighted amid ongoing budget discussions.